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Manhattan Real Estate Market 2010 Outlook: A Bumpy Road to Recovery?

Real Estate Agent with Keller Williams Prestige Properties

Happy New Year everyone, I hope your 2010 is off to a good start! An eventful 2009 is behind us, so let’s catch up on Manhattan’s residential real estate market’s performance and explore what 2010 may bring.

 Manhattan Real Estate Market 2010 Outlook: A Bumpy Road to Recovery?

A sustainable surge?

Manhattan residential real estate average prices closed down about 13% in 2009 vs. 2008, despite a fall-season volume surge that still seems to have legs. The average price of an apartment fell to ~ $1.3 million at year-end.

 Pesky job losses still a concern

Persistent unemployment is weighing down our market: NYC unemployment rose to 10.6% from November’s 10% rate, pushing 425,000+ out of work across retail, legal & publishing sectors, mirroring financial sector job losses.

 It’s unlikely we’ll have a robust real estate market recovery in the face of worrisome economic headwinds. Not to mention that credit availability hasn’t returned to completely rational levels.  The expiring Homebuyer Tax Credit may also put a crimp in what’s been a key source of buying.

Market convergence & higher rates are drawing focus

Meanwhile the Dow surged 60% in 2009, in the aftermath of gargantuan global government monetary stimulus packages. With interest rates set to rise this year, market participants are watching closely for revenue-driven earnings growth, not just the cost-cutting-type. The impact of rate hikes on prospective real estate buyers is yet to be seen.

 Is the Manhattan market cut from a different cloth?

The Mortgage Bankers Association says delinquencies on 1-4 unit residential property loans rose to nearly 10% of all U.S. loans. Manhattan’s foreclosure rates are unlikely to skyrocket like other parts of the Midwest, West and Southeast, partly due to the stringent financial controls imposed by co-op boards.

But the flood of resetting “prime option-ARM’s” could certainly upset the applecart for those who financed their purchase of co-op shares, as payment increases for some could top 60%, according to Fitch ratings agency.

 That said, Manhattan real estate’s supply/demand imbalance has always provided good price support: we now have less than 7000 active “listed properties” for a population of ~1.6 million.

However, a stronger dollar trend (it’s up nearly 3% vs. the euro this year) could temper foreign demand for our real estate, which has been a significant source of demand in recent years.

 Bottom line:

All eyes are on U.S. job-growth prospects since consumer spending drives 70% of Gross Domestic Product (GDP) & housing demand. Of concern is that the Fed’s reversal of stimulus measures may put a damper on a burgeoning recovery (Q4/2009 GDP was +5.7%).  

 We’re looking at a mixed bag of possibilities no doubt. But don’t be surprised if in the short-term, despite our recent uptick, we see erratic real estate prices with a downward bias, until we get a clearer picture on job-creation. Meanwhile we’ll continue to help our owners and buyers navigate any oncoming bumps in the road. Feel free to share your feedback!

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BODY { FONT-FAMILY:Times New Roman; FONT-SIZE:12pt } P { FONT-FAMILY:Times New Roman; FONT-SIZE:12pt } DIV { FONT-FAMILY:Times New Roman; FONT-SIZE:12pt } TD { FONT-FAMILY:Times New Roman; FONT-SIZE:12pt } Terry Henry, Realtor®, M.B.A.
Keller Williams Prestige Properties
(917) 828-0804